© 2006 Prentice Hall, Inc.C – 1 Transportation Modeling Module C

© 2006 Prentice Hall, Inc.C – 2 Transportation Modeling  An interactive procedure that finds the least costly means of moving products from a series of sources to a series of destinations  Can be used to help resolve distribution and location decisions

© 2006 Prentice Hall, Inc.C – 3 Transportation Modeling  A special class of linear programming  Need to know 1.The origin points and the capacity or supply per period at each 2.The destination points and the demand per period at each 3.The cost of shipping one unit from each origin to each destination

© 2006 Prentice Hall, Inc.C – 4 Transportation Problem To FromAlbuquerqueBostonCleveland Des Moines $5$4$3 Evansville$8$4$3 Fort Lauderdale $9$7$5 Table C.1

© 2006 Prentice Hall, Inc.C – 5 Transportation Problem Albuquerque (300 units required) Des Moines (100 units capacity) Evansville (300 units capacity) Fort Lauderdale (300 units capacity) Cleveland (200 units required) Boston (200 units required) Figure C.1

© 2006 Prentice Hall, Inc.C – 6 Transportation Matrix From To AlbuquerqueBostonCleveland Des Moines Evansville Fort Lauderdale Factory capacity Warehouse requirement $5 $4 $3 $9 $8 $7 Cost of shipping 1 unit from Fort Lauderdale factory to Boston warehouse Des Moines capacityconstraint Cell representing a possible source-to- destination shipping assignment (Evansville to Cleveland) Total demand and total supply Cleveland warehouse demand Figure C.2

© 2006 Prentice Hall, Inc.C – 7 Northwest-Corner Rule  Start in the upper left-hand cell (or northwest corner) of the table and allocate units to shipping routes as follows: 1.Exhaust the supply (factory capacity) of each row before moving down to the next row 2.Exhaust the (warehouse) requirements of each column before moving to the next column 3.Check to ensure that all supplies and demands are met

© 2006 Prentice Hall, Inc.C – 8 Northwest-Corner Rule 1.Assign 100 tubs from Des Moines to Albuquerque (exhausting Des Moines’s supply) 2.Assign 200 tubs from Evansville to Albuquerque (exhausting Albuquerque’s demand) 3.Assign 100 tubs from Evansville to Boston (exhausting Evansville’s supply) 4.Assign 100 tubs from Fort Lauderdale to Boston (exhausting Boston’s demand) 5.Assign 200 tubs from Fort Lauderdale to Cleveland (exhausting Cleveland’s demand and Fort Lauderdale’s supply)

© 2006 Prentice Hall, Inc.C – 9 To (A) Albuquerque (B) Boston (C) Cleveland (D) Des Moines (E) Evansville (F) Fort Lauderdale Warehouse requirement Factory capacity $5 $4 $3 $9 $8 $7 From Northwest-Corner Rule Figure C.3 Means that the firm is shipping 100 bathtubs from Fort Lauderdale to Boston

© 2006 Prentice Hall, Inc.C – 10 Northwest-Corner Rule Computed Shipping Cost Route FromToTubs ShippedCost per UnitTotal Cost DA100$5$ 500 EA20081,600 EB FB FC2005$1,000 Total: $4,200 Table C.2 This is a feasible solution but not necessarily the lowest cost alternative

© 2006 Prentice Hall, Inc.C – 11 Intuitive Lowest-Cost Method 1.Identify the cell with the lowest cost 2.Allocate as many units as possible to that cell without exceeding supply or demand; then cross out the row or column (or both) that is exhausted by this assignment 3.Find the cell with the lowest cost from the remaining cells 4.Repeat steps 2 and 3 until all units have been allocated

© 2006 Prentice Hall, Inc.C – 12 Intuitive Lowest-Cost Method To (A) Albuquerque (B) Boston (C) Cleveland (D) Des Moines (E) Evansville (F) Fort Lauderdale Warehouse requirement Factory capacity $5 $4 $3 $9 $8 $7 From 100 First, $3 is the lowest cost cell so ship 100 units from Des Moines to Cleveland and cross off the first row as Des Moines is satisfied Figure C.4

© 2006 Prentice Hall, Inc.C – 13 Intuitive Lowest-Cost Method To (A) Albuquerque (B) Boston (C) Cleveland (D) Des Moines (E) Evansville (F) Fort Lauderdale Warehouse requirement Factory capacity $5 $4 $3 $9 $8 $7 From 100 Second, $3 is again the lowest cost cell so ship 100 units from Evansville to Cleveland and cross off column C as Cleveland is satisfied Figure C.4

© 2006 Prentice Hall, Inc.C – 14 Intuitive Lowest-Cost Method To (A) Albuquerque (B) Boston (C) Cleveland (D) Des Moines (E) Evansville (F) Fort Lauderdale Warehouse requirement Factory capacity $5 $4 $3 $9 $8 $7 From Third, $4 is the lowest cost cell so ship 200 units from Evansville to Boston and cross off column B and row E as Evansville and Boston are satisfied Figure C.4

© 2006 Prentice Hall, Inc.C – 15 Intuitive Lowest-Cost Method To (A) Albuquerque (B) Boston (C) Cleveland (D) Des Moines (E) Evansville (F) Fort Lauderdale Warehouse requirement Factory capacity $5 $4 $3 $9 $8 $7 From Finally, ship 300 units from Albuquerque to Fort Lauderdale as this is the only remaining cell to complete the allocations Figure C.4

© 2006 Prentice Hall, Inc.C – 16 Intuitive Lowest-Cost Method To (A) Albuquerque (B) Boston (C) Cleveland (D) Des Moines (E) Evansville (F) Fort Lauderdale Warehouse requirement Factory capacity $5 $4 $3 $9 $8 $7 From Total Cost= $3(100) + $3(100) + $4(200) + $9(300) = $4,100 Figure C.4

© 2006 Prentice Hall, Inc.C – 17 Intuitive Lowest-Cost Method To (A) Albuquerque (B) Boston (C) Cleveland (D) Des Moines (E) Evansville (F) Fort Lauderdale Warehouse requirement Factory capacity $5 $4 $3 $9 $8 $7 From Total Cost= $3(100) + $3(100) + $4(200) + $9(300) = $4,100 Figure C.4 This is a feasible solution, and an improvement over the previous solution, but not necessarily the lowest cost alternative

© 2006 Prentice Hall, Inc.C – 18 Stepping-Stone Method 1.Select any unused square to evaluate 2.Beginning at this square, trace a closed path back to the original square via squares that are currently being used 3.Beginning with a plus (+) sign at the unused corner, place alternate minus and plus signs at each corner of the path just traced

© 2006 Prentice Hall, Inc.C – 19 Stepping-Stone Method 4.Calculate an improvement index by first adding the unit-cost figures found in each square containing a plus sign and subtracting the unit costs in each square containing a minus sign 5.Repeat steps 1 though 4 until you have calculated an improvement index for all unused squares. If all indices are ≥ 0, you have reached an optimal solution.

© 2006 Prentice Hall, Inc.C – 20 $5 $8$ Stepping-Stone Method To (A) Albuquerque (B) Boston (C) Cleveland (D) Des Moines (E) Evansville (F) Fort Lauderdale Warehouse requirement Factory capacity $5 $4 $3 $9 $8 $7 From Figure C.5 Des Moines- Boston index = $4 - $5 + $8 - $4 = +$3

© 2006 Prentice Hall, Inc.C – 21 Stepping-Stone Method To (A) Albuquerque (B) Boston (C) Cleveland (D) Des Moines (E) Evansville (F) Fort Lauderdale Warehouse requirement Factory capacity $5 $4 $3 $9 $8 $7 From Figure C.6 Start Des Moines-Cleveland index = $3 - $5 + $8 - $4 + $7 - $5 = +$4

© 2006 Prentice Hall, Inc.C – 22 Stepping-Stone Method To (A) Albuquerque (B) Boston (C) Cleveland (D) Des Moines (E) Evansville (F) Fort Lauderdale Warehouse requirement Factory capacity $5 $4 $3 $9 $8 $7 From Evansville-Cleveland index = $3 - $4 + $7 - $5 = +$1 (Closed path = EC - EB + FB - FC) Fort Lauderdale-Albuquerque index = $9 - $7 + $4 - $8 = -$1 (Closed path = FA - FB + EB - EA)

© 2006 Prentice Hall, Inc.C – 23 Stepping-Stone Method 1.If an improvement is possible, choose the route (unused square) with the largest negative improvement index 2.On the closed path for that route, select the smallest number found in the squares containing minus signs 3.Add this number to all squares on the closed path with plus signs and subtract it from all squares with a minus sign

© 2006 Prentice Hall, Inc.C – 24 Stepping-Stone Method To (A) Albuquerque (B) Boston (C) Cleveland (D) Des Moines (E) Evansville (F) Fort Lauderdale Warehouse requirement Factory capacity $5 $4 $3 $9 $8 $7 From Figure C Add 100 units on route FA 2. 2.Subtract 100 from routes FB 3. 3.Add 100 to route EB 4. 4.Subtract 100 from route EA

© 2006 Prentice Hall, Inc.C – 25 Stepping-Stone Method To (A) Albuquerque (B) Boston (C) Cleveland (D) Des Moines (E) Evansville (F) Fort Lauderdale Warehouse requirement Factory capacity $5 $4 $3 $9 $8 $7 From Figure C.8 Total Cost= $5(100) + $8(100) + $4(200) + $9(100) + $5(200) = $4,000

© 2006 Prentice Hall, Inc.C – 26 Special Issues in Modeling  Demand not equal to supply  Called an unbalanced problem  Common situation in the real world  Resolved by introducing dummy sources or dummy destinations as necessary with cost coefficients of zero

© 2006 Prentice Hall, Inc.C – 27 Special Issues in Modeling Figure C.9 New Des Moines capacity To (A) Albuquerque (B) Boston (C) Cleveland (D) Des Moines (E) Evansville (F) Fort Lauderdale Warehouse requirement Factory capacity $5 $4 $3 $9 $8 $7 From Dummy Total Cost= 250($5) + 50($8) + 200($4) + 50($3) + 150($5) + 150(0) = $3,350

© 2006 Prentice Hall, Inc.C – 28 Special Issues in Modeling  Degeneracy  To use the stepping-stone methodology, the number of occupied squares in any solution must be equal to the number of rows in the table plus the number of columns minus 1  If a solution does not satisfy this rule it is called degenerate

© 2006 Prentice Hall, Inc.C – 29 To Customer 1 Customer 2 Customer 3 Warehouse 1 Warehouse 2 Warehouse 3 Customer demand 100 Warehouse supply $8 $7 $2 $9 $6 $9 $7 $10 From Special Issues in Modeling Figure C.10 Initial solution is degenerate Place a zero quantity in an unused square and proceed computing improvement indices